EXHIBIT 99.2
D&N FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
March 31 December 31
1999 1998
---------------------------------------
(In thousands)
---------------------------------------
(Unaudited)
ASSETS
Cash and due from banks $ 12,451 $ 15,945
Federal funds sold 900 --
Interest-bearing deposits in other banks 23,708 34
---------- ----------
Total cash and cash equivalents 37,059 15,979
Investment securities
(market value of $28,676,000 in 1999 and $28,678,000 in 1998 28,676 28,678
Investment securities available for sale (at market value) 58,298 101,394
Mortage-backed securities
(market value $32,061,000 in 1999 and $42,025,000 in 1998) 31,552 41,446
Mortgage-backed securities available for sale (at market value) 533,590 452,766
Loans receivable (including loans held for sale of $8,134,000 in 1999
and $8,801,000 in 1998) 1,329,159 1,340,143
Allowance for loan losses (11,044) (10,995)
---------- ----------
Net loans receivable 1,318,115 1,329,148
Other real estate owned, net 1,402 857
Federal income taxes 637 2,721
Office properties and equipment, net 18,818 19,005
Other assets 26,820 26,160
---------- ----------
Total Assets $2,054,967 $2,018,154
========== ==========
LIABILITIES
Checking and NOW accounts $ 154,276 $ 166,802
Money market accounts 97,868 103,878
Savings deposits 244,347 237,600
Time deposits 774,183 754,317
Accrued interest 1,713 1,543
---------- ----------
Total deposits 1,272,387 1,264,140
Securities sold under agreements to repurchase 78,049 18,153
FHLB advances and other borrowed money 533,325 559,982
Advance payments by borrowers and investors held in escrow 18,164 25,416
Other liabilities 6,155 6,284
---------- ----------
Total liabilities 1,908,080 1,873,975
PREFERRED STOCK OF SUBSIDIARY 28,719 28,719
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value per share (1,000,000 shares authorized;
none issued) -- --
Common stock, $.01 par value per share (shares authorized - 25,000,000;
shares outstanding - 9,394,273 in 1999 and 9,318,089 in 1998) 94 93
Additional paid-in capital 79,323 78,375
---------- ----------
Total paid-in capital 79,417 78,468
Retained earnings - substantially restricted 38,857 35,265
Accumulated other comprehensive income (loss) (106) 1,727
---------- ----------
Total stockholders' equity 118,168 115,460
---------- ----------
Total Liabilities and Stockholders' Equity $2,054,967 $2,018,154
========== ==========
See Notes to Consolidated Financial Statements.
- 3 -
D&N FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
March 31
1999 1998
------------------------------
(In thousands, except per share)
Interest Income:
Loans $25,870 $26,829
Mortgage-backed securities 8,341 6,145
Investments and deposits 1,288 1,573
------- -------
TOTAL INTEREST INCOME 35,499 34,547
Interest expense:
Deposits 13,367 11,985
Securities sold under agreements to repurchase 796 1,991
FHLB advances and other borrowed money 7,727 7,366
------- -------
TOTAL INTEREST EXPENSE 21,890 21,342
------- -------
NET INTEREST INCOME 13,609 13,205
Provision for loan losses 675 525
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 12,934 12,680
Nointerest income:
Loan administrative fees 699 535
Deposit related fees 1,337 1,045
Gain on sale of loans available for sale 841 885
Gain on sale of mortgage-backed securities available for sale 737 --
Other income 199 736
------- -------
TOTAL NONINTEREST INCOME 3,813 3,201
Nointerest income:
Compensation and benefits 5,350 4,822
Occupancy 975 816
Other expense 3,353 3,196
------- -------
GENERAL AND ADMINISTRATIVE EXPENSE 9,678 8,834
Other real estate owned, net 30 18
Federal deposit insurance premiums 188 243
------- -------
TOTAL NONINTEREST EXPENSE 9,896 9,095
------- -------
INCOME BEFORE INCOME TAX EXPENSE 6,851 6,786
Federal income tax expense 2,151 2,208
------- -------
INCOME BEFORE PREFERRED STOCK DIVIDENDS 4,700 4,578
Preferred stock dividends of subsidiary 681 681
------- -------
NET INCOME $ 4,019 $ 3,897
======= =======
Earnings per share:
BASIC $ 0.43 $ 0.43
======= =======
DILUTED $ 0.42 $ 0.41
======= =======
See Notes to Consolidated Financial Statements.
- 4 -
D&N FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
1999 1998
---------------------------
(In thousands)
---------------------------
OPERATING ACTIVITIES
Net Income $ 4,019 $ 3,897
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 675 525
Depreciation and amortization of office properties and equipment 628 541
Amortization of discounts on purchased loans and securities (1,144) (675)
Originations and purchases of loans held for sale (16,527) (37,607)
Proceeds from sales of loans held for sale 64,376 52,097
Gain on loans and mortgage-backed securities available for sale (737) --
Gain on sale of loan servicing rights -- (193)
Amortization and writedowns of mortgage servicing rights 250 187
Other 2,415 708
--------- ---------
Net cash provided by operating activities 53,955 19,480
INVESTING ACTIVITIES
Proceeds from maturities of investment securities 154,989 14,986
Purchases of investment securities to be held to maturity (111,575) (2,450)
Proceeds from sales of mortgage-backed securities available for sale 40,785 --
Principal collected on mortgage-backed securities 51,926 32,530
Purchases of mortgage-backed securities (164,800) (24,894)
Loans purchased (63,196) (69,219)
Net change in loans receivable 25,408 (24,123)
(Increase) decrease in other real estate owned (545) 183
Sales of loan servicing rights -- 193
Purchases of office properties and equipment 421 (978)
--------- --------
Net cash used by investing activities (67,429) (73 ,772)
FINANCING ACTIVITIES
Net change in time deposits 19,866 (22,767)
Net change in other deposits 11,789 17,956
Proceeds from notes payable, securities sold under agreements
to repurchase and other borrowed money 119,896 115,000
Payments on maturity of notes payable, securities sold under
agreements to repurchase and other borrowed money (86,689) (67,127)
Net change in advance payments by borrowers and investors
held in escrow (7,252) 2,313
Common stock cash dividend (470) (457)
Proceeds from issuance of stock 992 655
Purchases of treasury stock/warrants -- (364)
--------- --------
Net cash provided by financing activities 34,554 45,209
--------- --------
Increase(Decrease) in cash and cash equivalents 21,080 (9,083)
Cash and cash equivalents at beginning of period 15,979 20,497
--------- --------
Cash and cash equivalents at end of period $ 37,059 $ 11,414
========= ========
Noncash transactions:
Issuance of treasury stock on exercise of stock options $ -- 884
========= ========
See Notes to Consolidated Financial Statements.
- 5 -
D&N FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
solely of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for interim periods are not
necessarily indicative of the results that may be expected for the full year.
NOTE 2: EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income by the average
number of shares outstanding during the applicable period.
The company had stock options which are considered to be potentially dilutive to
common stock. Diluted earnings per share is calculated by dividing net income
by the average number of shares outstanding during the applicable period
adjusted for these potentially dilutive options.
The following table sets forth the computation of per share earnings as provided
in SFAS 128, and illustrates the dilutive effect of options outstanding.
Three months ended
March 31, 1999 March 31, 1998
------------------ -----------------------
Earnings Earnings
Shares per share Shares per share
------ ---------- ------ ----------
(In thousands, except per share earnings)
Basic EPS 9,357 $ 0.43 9,115 $ 0.43
Net dilutive effect of stock
options outstanding 236 (0.01) 380 (0.02)
------ --------- ------ ---------
Diluted EPS 9,593 $ 0.42 9,495 $ 0.41
====== ====== ====== =========
- 6 -
NOTE 3: ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses represents the Company's estimate of probable
credit losses related to specifically identified loans as well as probable
credit losses inherent in the remainder of the Company's loan portfolio that
have been incurred as of the balance sheet date. The allowance for loan losses
is maintained at an adequate level through additions to the provisions for loan
losses. An appropriated level of the general allowance is determined based on
the application of projected risk percentages to graded loans by categories. In
addition, specific reserves are established for individual loans when deemed
necessary by management. Management also considers other factors when size and
character of the loan portfolio, consultation with regulatory authorities,
amount of nonperforming loans, delinquency trends, economic conditions and
industry trends.
Changes in the allowance for loan losses are summarized as follows:
Three Months Ended
March 31,
1999 1998
---------------------------
(In thousands)
Balance at beginning of period $ 10,995 $ 10,549
Charge-offs:
Mortgage loans 53 10
Commercial loans 12 --
Consumer loans 664 458
-------------------
Total 729 468
Recoveries:
Commercial loans 2 --
Consumer loans 101 73
-------------------
Total 103 73
-------------------
Net charge-offs 626 395
Provision charged to operations 675 525
-------------------
Balance at end of period $11,044 $10,679
===================
NOTE 4: COMPREHENSIVE INCOME
The Bank adopted Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income", as of January 1, 1998. SFAS No. 130
established standards for reporting and display of comprehensive income and its
components. Total Comprehensive Income for the three month period ended March
31, 1999 and 1998 was as follows:
- 7 -
Three Months Ended
March 31,
1999 1998
--------------------
(In thousands)
--------------------
Net income $ 4,019 $ 3,897
Other comprehensive income:
Unrealized holding gains and losses
on debt securities available for sale,
net of tax (1,833) (159)
------- -------
Total accumulated other comprehensive
income (1,833) (159)
------- -------
Total Comprehensive Income $ 2,186 $ 3,738
======= =======
- 8 -